Which of the following is one way to detect autocorrelation?
A) Estimate a standard OLS model and look at sign of coefficient.
B) Graph the residuals over time.
C) Estimate an auxiliary regression where the value of X is the dependent variable and the lagged value of X is the independent variable.
D) Estimate an auxiliary regression where the value of e (the residual) is the dependent variable and the lagged value of X is the independent variable.

Question

Quizplus · Accepted Answer

Graphing the residuals over time can help detect patterns or trends in the residuals, indicating the presence of autocorrelation. This method visually assesses whether residuals from different time periods are correlated with each other.

Which of the Following Is One Way to Detect Autocorrelation